By Harsh Doshi
The European Investment Bank (EIB) has promised to sanction a loan of Rs. 1400 crore – roughly 200 million – to SBI to fund solar power projects. This funding is spread over a period of twenty years and it will enable solar power production of 530 MW at five different mega solar power projects. This funding goes a long way into the promises that both India and EU made to reduce carbon emissions at COP 21 in Paris.
The EIB is a development investment bank of the European Union (EU). The bank is owned by the member nations of the EU. The primary investment of the EIB takes place in four priority areas namely Innovation and Skills, Access to finance for smaller businesses, Infrastructure, and Environment and Climate. It is not the first time that EIB is making a large scale investment in India. For the purpose of renewable energy alone, EIB has invested about Rs. 11,900 crore (1.7 billion) in India, since 1993.
India’s solar power narrative
India has built for itself a strong solar power infrastructure and an even stronger future potential. The NDA Government under Prime Minister Narendra Modi and Power Minister Piyush Goyal set an ambitious target of 100 GW of solar power generation capacity by 2022, with 40 GW coming from rooftop solar panels. A lot of solar power generation and transmission auctions were held in 2015 and 2016, with the bid falling to as low as Rs. 4 per unit of electricity generated. This was followed by India’s promise to generate clean energy in the COP 21 in Paris. Words have been transmitted into action with major states allocating more funds to renewable sources of energy as compared to non-renewable energy in the latest 2017-18 budgets. Though India has only achieved close to 20% of its 100 GW target, it requires funds, photovoltaic cell production capacity, infrastructure, and most necessarily, vast plots of land in sunny areas to set up mega solar power projects.
Positive linkages of the move
Firstly, solar power while being clean, comes cheap when the relevant economies of scales are reached for production. This is one major reason that India is seeing a lot of FDI in solar power. This is also the reason that multilateral agencies like EIB are interested in investing in India because it has a sure return on investment.
Secondly, India’s Solar Power Mission, under which the loan sanction has been realised, has put severe restrictions on manufacturing. At least thirty percent of all the raw materials that go into building the solar panels have to be sourced via local manufacturers. This will help India in building its own photovoltaic cell production capacity that will be competitive in the long run. This also furthers India’s mission of Make In India, generating huge employment prospects for labour in the manufacturing sector. This move is among the many small steps that India is taking to reach its ambitious 100 GW target by 2022.